You should start with a Level II inspection. That will guide you in your choices. From what I can see here, I would lean towards getting a plasma torch and cutting that steelform out, repairing the masonry and rebuilding it as a masonry fireplace with the facing of choice following your codes. No, you cannot use metal studs and Hardibacker or any old cementitious backer board. I'm only aware of the old formulation Durock by USG as having passed ASTM E-136 as being rated 'noncombustible'. I have not found this rating yet on the new Durock Light product so for now, I would abstain from their use in lieu of solid masonry units and mortar.
Yes, you would need to brick up those convective air chambers before covering them.
People have a mental image of chimneys being a solid mass of masonry. Look closely at all the gaps in the photo presented here. This is how masons usually build chimneys and fireplaces--with huge voids instead of solid masonry units with full head and bed joints and any gaps push-filled.
You could install a gas DV insert but they are not a repair item so the chimney and fireplace must be in good working order to install one of those. It would be better, though, than an open heart fire. Sealed combustion and venting with great supplemental heat, controls, backup heat source, and look great, too.
TX, I'm glad you stopped in to ask before diving in. BTW, those DIY shows are the absolute worst as they NEVER consult the codes or ask experts in the applied fields before charging off in the wrong direction. Most should be shut down.
HTH,